The Six Steps Involved In Getting Out Of Bankruptcy

2015-04-24   minute read

Wesley Cowan


Anyone wishing to file for personal bankruptcy in Canada will have to go through six key steps prior to receiving their discharge from bankruptcy.  These six steps can be summarized as follows:

  • Initial meeting with Bankruptcy Trustee
  • Second meeting with Bankruptcy Trustee
  • Submission of necessary forms to Superintendent of Bankruptcy (Industry Canada)
  • Submission of Monthly Income and Expense Reports to the Bankruptcy Trustee
  • First counselling session within 60 days of bankruptcy
  • Second counselling session before 8th month of bankruptcy
Two people crunching numbers on a laptop with a notebook on the table

Step 1 and Step 2: Initial Meetings with the Bankruptcy Trustee

In most instances, a consumer wishing to file for personal bankruptcy will meet with a Bankruptcy Trustee twice before the trustee has sufficient information and documentation to submit the required forms to Industry Canada.  At a minimum, the Bankruptcy Trustee will need to collect the following information and documentation:

  • Background information – Causes of financial difficulty
  • Documentation confirming the individual’s full legal name
  • Copy of most recent income tax return and paystub from employer
  • Summary of monthly expenses
  • Details of assets the person owns
  • Complete list of debts and amounts owing
  • Copy of bank statements from any bank accounts in the individual’s name

Step 3: Submission of Necessary Forms to the Office of the Superintendent of Bankruptcy

In order to file for personal bankruptcy the Bankruptcy Trustee must prepare the following three forms which, after having been signed by the person declaring bankruptcy, are submitted electronically to the Office of the Superintendent of Bankruptcy at Industry Canada:

Statement of Affairs (Form 79)

Monthly Income and Expense Statement of the Debtor and the Family Unit (Form 65)

Assignment for the General Benefit of Creditors (Form 21)

Usually within 48 hours of submitting these documents, the Bankruptcy Trustee will receive a Certificate of Appointment from the Industry Canada.  The bankruptcy officially starts on that date, and the individual is then referred to as a “bankrupt.”  Within 5 business days of receiving the Certificate of Appointment, the Bankruptcy Trustee will send notice to all the bankrupt’s creditors.  On the date when the Bankruptcy Trustee receives the Certificate of Appointment most legal proceedings against the bankrupt are stayed or suspended.  Bankruptcy prevents unsecured creditors from taking action against the bankrupt, but does not stop a secured creditor from seizing assets if a secured loan related to that asset is in default (e.g. repossession of a car for non-payment).  Once the person obtains a discharge from bankruptcy—usually between 9 and 36 months from the date the bankruptcy started - they will be known as a “discharged bankrupt.”

Step 4: Submission of Income and Expense Reports to the Bankruptcy Trustee

For most of the bankruptcy, the bankrupt is required to provide one Income and Expense Report per month to the Trustee, which includes proof of income (pay stubs, bank statements, etc.) and proof of allowable income deductions.  If the bankrupt’s monthly take-home income after allowable deductions is higher than certain government-set thresholds, the bankrupt may be required to pay ‘surplus income’ into the bankruptcy for the benefit of his or her creditors. If a bankrupt is required to pay surplus income, their bankruptcy may be extended to allow for more payments to be made, allowing their creditors to recoup more of what they are owed.

Step 5: Bankrupt’s First Counselling Session

The Bankruptcy Trustee generally meets with the bankrupt in the second month after receiving the Certificate of Appointment, and will review the person’s current income and expenses, as well as any correspondence the bankrupt may have received from creditors.  In addition, the Bankruptcy Trustee and bankrupt will discuss topics related to money management and budgeting.

Step 6: Bankrupt’s Second Counselling Session

Generally speaking, at least one month after the first counselling session, but before the 8th month of the bankruptcy, the bankrupt is required to attend the second counselling session with the Trustee.  The focus of this meeting will be to review the causes of the bankruptcy, discuss ways of avoiding future debt problems, and to review credit rebuilding strategies. 

Within the 30 to 60 day period prior to the anticipated discharge date of the bankrupt, the Bankruptcy Trustee may be required to file a report with the Superintendent of Bankruptcy which indicates whether there is any objection to the bankrupt’s discharge, and if so, on what grounds.  If there is no opposition, the discharge is deemed to take place automatically, and a discharge certificate will be issued by the Bankruptcy Trustee.  If there is an opposition, the matter will be heard before the bankruptcy court and the court will issue a discharge order that may subject to certain conditions.

The length of time it will take from the date of the Certificate of Appointment to the date of the bankrupt’s discharge will depend upon the following four variables:

  • Any opposition to the bankrupt’s discharge from bankruptcy
  • Delays arising from the bankrupt’s election to purchase a non-exempt asset from the Trustee
  • Any prior bankruptcies
  • Any obligation to make surplus income payments

The following chart summarizes the length of time it will take a bankrupt to obtain a discharge from bankruptcy.

Timeline for Obtaining Bankruptcy Discharge


First Time Bankrupt

Second Time Bankrupt*

9 months

No surplus income payments

No delays from purchase of non-exempt property

No opposition to discharge


21 months

Where surplus income payments are required

No delays from purchase of non-exempt property

No opposition to discharge


24 months


Where no surplus income payments are required

No delays from purchase of non-exempt property

No opposition to discharge

36 months


Where surplus income payments are required

No delays from purchase of non-exempt property

No opposition to discharge

More than 36 months


Where more time is needed to make required surplus income payments

Delays arising from purchase of non-exempt property and/or opposition to discharge

Opposition to discharge or outstanding court ordered conditions of discharge

*If a bankrupt has filed for bankruptcy more than once previously, then the bankrupt must go before an official of the bankruptcy court who will decide the minimum waiting period for obtaining a discharge, and any other conditions of discharge.

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